US and Israeli strikes - and Iranian retaliation - sent shockwaves through sectors from shipping to air travel to oil, amid warnings of rising energy costs and disruption to business in the Gulf, a strategic waterway and global trade hub.
US President Donald Trump said the attack on Saturday was intended to ensure Iran could not have a nuclear weapon, to contain its missile program and to eliminate threats to the United States and its allies.
In an interview with the Atlantic magazine on Sunday, Trump said Iran's leadership wanted to talk to him and he had agreed.
But he has yet to lay out his longer-term aims in Iran, which faces a power vacuum that could leave it in chaos, with unforeseeable consequences for the region.
As the first US casualties were reported, and with the vital Strait of Hormuz closed and the glittering Gulf cities of Dubai, Abu Dhabi and Doha under bombardment, the scale of the risk taken by Trump in launching the attack was becoming clearer.
Only around one in four Americans approve of the operation, according to a Reuters/Ipsos poll, and if Hormuz, which is the passage for about 20 per cent of world oil supplies, remains closed for more than a few days, squeezed US consumers will start to feel the pressure on prices at the pumps, months before vital midterm elections.
Iran's Revolutionary Guards said on Sunday they had hit three US and UK oil tankers in the Gulf and the Strait of Hormuz, and attacked military bases in Kuwait and Bahrain with drones and missiles.
Shipping data showed hundreds of vessels including oil and gas tankers dropping anchor in nearby waters with traders expecting sharp jumps in crude oil prices on Monday.
Global air travel was also heavily disrupted as continued air strikes kept major Middle Eastern airports, including Dubai - the world's busiest international hub - closed in one of the biggest aviation interruptions in recent years.
Iran's President Masoud Pezeshkian said a leadership council composed of himself, the judiciary head and a member of the powerful Guardians Council had temporarily assumed the duties of Supreme Leader.
Oman's foreign ministry said Iranian Foreign Minister Abbas Araqchi had indicated Tehran was open to any serious efforts at de-escalation.
But it remained unclear what the longer-term prospects were for Iran to rebuild its leadership and replace the 86-year-old Khamenei, who had held power since the death of the founder of the Islamic Republic, Ayatollah Ruhollah Khomeini in 1989.
Israel claimed responsibility for killing Khamenei, in what it said was a "precise, large-scale operation" guided by intelligence, while he was in his central leadership compound in the heart of Tehran.
It said it aimed to dominate the skies over Tehran, giving no sign of planning an end to the biggest aerial operation in its history, involving hundreds of fighter jets.
"We have the capabilities and the targets to keep going on for as long as necessary," Israeli military spokesperson Lieutenant Colonel Nadav Shoshani said.
Trump warned that the US would hit Iran "with a force that has never been seen before" if it struck back.
But as Iran fired renewed missile barrages across the region, Israel's ambulance service said nine people were killed in the town of Beit Shemesh, the United Arab Emirates said Iranian attacks killed three people and Kuwait reported one dead.
Three US service personnel were also killed and five seriously wounded, the first American casualties of the operation, the US military said.
Trump said on social media the US military had destroyed nine Iranian warships so far and was "going after the rest".
Inside Iran, some grieved for Khamenei while others celebrated his death, exposing a deep fault line in a country stunned by the sudden demise of the man who ruled for decades.
Thousands of Iranians were killed in a crackdown authorised by Khamenei against anti-government protests in January, the deadliest wave of unrest since the Islamic Revolution of 1979.
Footage from Tehran showed mourners packed into a square, dressed in black and many of them weeping.
But videos posted on social media also showed joy and defiance elsewhere, with people cheering as a statue was toppled in the city of Dehloran in Ilam province, dancing in the streets of Karaj city, near Tehran in Alborz province, and celebrating in the streets of Izeh in Khuzestan province.
Experts said that while Khamenei's death and those of other Iranian leaders would deal Iran a major blow, it would not necessarily spell the end of Iran's entrenched clerical rule or the sway of the elite Revolutionary Guards over the population.
